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Hanmi Reports 2022 Fourth Quarter and Full Year Results

HAFC

Record full year earnings, loan production, and significant improvements in asset quality

LOS ANGELES, Jan. 24, 2023 (GLOBE NEWSWIRE) -- Hanmi Financial Corporation (NASDAQ: HAFC, or “Hanmi”), the parent company of Hanmi Bank (the “Bank”), today reported financial results for the 2022 fourth quarter and full year.

Net income for the fourth quarter of 2022 was $28.5 million, or $0.93 per diluted share, up 4.8% from $27.2 million, or $0.89 per diluted share, for the third quarter of 2022. The fourth quarter included a $1.5 million increase in net interest income and a $0.5 million reduction in credit loss expense, offset by a $1.4 million decrease in noninterest income and a $0.5 million increase in noninterest expense. In addition, income tax expense for the fourth quarter included a $1.4 million benefit due to a lower effective tax rate. Return on average assets and return on average equity for the fourth quarter of 2022 were 1.56% and 15.90%, respectively.

For the full year 2022, net income was $101.4 million, or $3.32 per diluted share, compared with $98.7 million, or $3.22 per diluted share, for the full year of 2021. The year-over-year improvement in net income reflects a $42.6 million, or 21.8%, increase in net interest income, offset by a $25.2 million reduction in the benefit from the year-ago credit loss expense recovery, a $6.3 million, or 15.5%, decrease in noninterest income and a $5.8 million, or 4.7%, increase in noninterest expense. Return on average assets and return on average equity for the full year 2022 were 1.44% and 14.83%, respectively.

CEO Commentary

“We delivered another quarter of solid results, capping off our fiscal year with strong momentum, delivering full year record net income and loan production, and an improved net interest margin, all while diligently managing our operating expenses and significantly improving our asset quality,” said Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation. “Over the course of the year, we successfully executed on our strategic initiatives, including further diversifying our loan portfolio, strengthening our relationships with existing customers, expanding our customer base and bolstering our core deposit franchise.

“We enter 2023 with a strong balance sheet and a demonstrated ability to manage through challenging times. Importantly, asset quality remains very healthy as we have been proactive with our customers, keeping open lines of communication and we stand ready to navigate this uncertain macroeconomic environment. We remain focused on continuing to build upon our foundation for prudent growth while strengthening the Hanmi franchise, all with the view of delivering attractive returns to our shareholders.

“I want to thank the entire Hanmi team for their exceptional work this year, which generated positive results for our customers and our shareholders. We just celebrated our 40th anniversary, an important milestone for our company. We look forward to building upon this storied history with a continued commitment to helping our customers reach their financial goals and, ultimately, strengthening the communities we call home.”

Fourth Quarter 2022 Highlights:

  • Fourth quarter net income was $28.5 million, or $0.93 per diluted share, up 4.8% from $27.2 million, or $0.89 per diluted share for the third quarter; full year 2022 net income increased 2.8% to $101.4 million, or $3.32 per diluted share from $98.7 million, or $3.22 per share for 2021.
  • Loans receivable increased 2.9% from September 30, 2022 to $5.97 billion at December 31, 2022 and 15.8% from year-end 2021; fourth quarter loan production was $473.8 million and reached $2.12 billion for the full year – 17.1% higher than 2021 when excluding 2021 second-draw Paycheck Protection Program (“PPP”) loans.
  • Deposits were $6.17 billion at December 31, 2022, down 0.5% from the third quarter and up 6.6% year-over-year; the mix of noninterest-bearing deposits remained strong at 41.2% of deposits at year-end.
  • Net interest income was up 2.3% sequentially from the third quarter, or $1.5 million, to $64.6 million for the fourth quarter and the net interest margin was 3.67%, up one basis point sequentially.
  • Fourth quarter noninterest income was $7.5 million, down $1.4 million from the previous quarter; lower SBA gain on sale income due to lower trade premiums and lower service charge and other fee income contributed to the decline as did a valuation adjustment to bank-owned life insurance.
  • Noninterest expense was $33.8 million, up 1.7% sequentially from the previous quarter, or $0.5 million; the efficiency ratio increased slightly to 46.99%, from 46.22% in the third quarter.
  • Fourth quarter credit loss expense was $0.1 million; the allowance for credit losses was $71.5 million and the ratio of the allowance to loans was 1.20%.
  • Criticized loans declined 26.7% sequentially from the third quarter to $125.2 million or 2.1% of loans at year-end; nonperforming assets declined 19.5% sequentially to $10.0 million or 0.14% of total assets at December 31, 2022 and declined 29.0% from year-end 2021.
  • Hanmi’s ratio of tangible common equity to tangible assets was 8.50% at December 31, 2022 and it had a Common equity Tier 1 capital ratio of 11.37% and a Total capital ratio of 14.49%.

For more information about Hanmi, please see the Q4 2022 Investor Update (and Supplemental Financial Information), which is available on the Bank’s website at www.hanmi.com and via a current report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov. Also, please refer to “Non-GAAP Financial Measures” herein for further details of the presentation of certain non-GAAP financial measures.

Quarterly Highlights
(Dollars in thousands, except per share data)
As of or for the Three Months Ended Amount Change
December 31, September 30, June 30, March 31, December 31, Q4-22 Q4-22
2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Net income $ 28,479 $ 27,169 $ 25,050 $ 20,695 $ 33,331 $ 1,310 $ (4,852 )
Net income per diluted common share $ 0.93 $ 0.89 $ 0.82 $ 0.68 $ 1.09 $ 0.04 $ (0.16 )
Assets $ 7,378,262 $ 7,128,511 $ 6,955,968 $ 6,737,052 $ 6,858,587 $ 249,751 $ 519,675
Loans receivable $ 5,967,133 $ 5,800,991 $ 5,655,403 $ 5,337,500 $ 5,151,541 $ 166,142 $ 815,592
Deposits $ 6,168,072 $ 6,201,376 $ 5,979,390 $ 5,783,170 $ 5,786,269 $ (33,304 ) $ 381,803
Return on average assets 1.56% 1.52% 1.45% 1.22% 1.93% 0.04 -0.37
Return on average stockholders' equity 15.90% 15.58% 14.92% 12.74% 20.89% 0.32 -4.99
Net interest margin 3.67% 3.66% 3.55% 3.10% 2.96% 0.01 0.71
Efficiency ratio(1) 46.99% 46.22% 46.05% 53.29% 53.81% 0.77 -6.82
Tangible common equity to tangible assets(2) 8.50% 8.40% 8.74% 9.07% 9.23% 0.10 -0.73
Tangible common equity per common share(2) $ 20.54 $ 19.60 $ 19.91 $ 20.02 $ 20.79 $ 0.94 $ (0.24 )
(1) Noninterest expense divided by net interest income plus noninterest income.
(2) Refer to "Non-GAAP Financial Measures" for further details.

Results of Operations
Net interest income for the fourth quarter increased $1.5 million to $64.6 million from $63.1 million for the third quarter of 2022, up 2.3%. The increase reflected primarily a 3.2% increase in average loans as the increase in the cost of interest-bearing deposits essentially offset the increase in average loan yields. Average loans were $5.88 billion for the 2022 fourth quarter compared with $5.70 billion for the 2022 third quarter. The yield on average loans for the 2022 fourth quarter increased 54 basis points to 5.21% from 4.67% for the 2022 third quarter while the cost of interest-bearing deposits increased 92 basis points to 1.70% from 0.78% for the 2022 third quarter. Fourth quarter loan prepayment fees were $0.1 million compared with $0.2 million for the third quarter. Net interest margin (taxable-equivalent) for the fourth quarter was 3.67% compared with 3.66% for the third quarter of 2022.

Net interest income was $237.6 million for the full year 2022 compared with $195.1 million for 2021, up 21.8%. The increase reflected the rise in the general level of interest rates during 2022 as well as the increase in average interest-earning assets and the change in asset composition to higher-yielding loans from lower-yielding deposits at banks. Average interest-earning assets for the full year 2022 increased 7.2% to $6.80 billion from $6.34 billion for 2021. Average loans for the full year 2022 were $5.60 billion, up 16.7% from $4.79 billion for 2021 while average interest-bearing deposits at banks were $236.7 million, down 65.4% from $684.4 million. The yield on average loans for the full year 2022 increased 26 basis points to 4.61% from 4.35% for 2021. The cost of interest-bearing deposits for the full year 2022 increased 43 basis points to 0.79% from 0.36% for 2021. Full year 2022 loan prepayment fees were $1.3 million compared with $0.9 million for 2021. Net interest margin (taxable-equivalent) for the full year 2022 was 3.50% compared with 3.08% for 2021. The 42 basis point increase in the net interest margin reflected the increase in average loan yields, partially offset by the increase in the cost of interest-bearing deposits.

As of or For the Three Months Ended (in thousands) Percentage Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
Net Interest Income 2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Interest and fees on loans receivable(1) $ 77,123 $ 66,976 $ 59,855 $ 53,924 $ 52,240 15.2 % 47.6 %
Interest on securities 3,633 3,271 2,930 2,516 1,821 11.1 % 99.5 %
Dividends on FHLB stock 289 245 242 248 248 18.0 % 16.5 %
Interest on deposits in other banks 1,194 958 193 216 302 24.6 % 295.4 %
Total interest and dividend income $ 82,239 $ 71,450 $ 63,220 $ 56,904 $ 54,611 15.1 % 50.6 %
Interest on deposits 14,900 6,567 2,457 2,013 2,236 126.9 % 566.4 %
Interest on borrowings 1,192 349 370 337 364 241.5 % 227.5 %
Interest on subordinated debentures 1,586 1,448 1,349 3,598 2,515 9.5 % -36.9 %
Total interest expense 17,678 8,364 4,176 5,948 5,115 111.4 % 245.6 %
Net interest income $ 64,561 $ 63,086 $ 59,044 $ 50,956 $ 49,496 2.3 % 30.4 %
(1)Includes loans held for sale.
For the Three Months Ended (in thousands) Percentage Change
Average Earning Assets and Interest-bearing Liabilities Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Loans receivable(1) $ 5,877,298 $ 5,696,587 $ 5,572,504 $ 5,231,672 $ 4,896,952 3.2 % 20.0 %
Securities(2) 966,299 956,989 945,291 930,505 914,148 1.0 % 5.7 %
FHLB stock 16,385 16,385 16,385 16,385 16,385 0.0 % 0.0 %
Interest-bearing deposits in other banks 138,476 181,401 136,473 494,887 802,901 -23.7 % -82.8 %
Average interest-earning assets $ 6,998,458 $ 6,851,362 $ 6,670,653 $ 6,673,449 $ 6,630,386 2.1 % 5.6 %
Demand: interest-bearing $ 119,106 $ 121,269 $ 122,771 $ 124,892 $ 122,602 -1.8 % -2.9 %
Money market and savings 1,781,834 2,079,490 2,139,488 2,106,008 2,078,659 -14.3 % -14.3 %
Time deposits 1,585,798 1,120,149 894,345 937,044 1,013,681 41.6 % 56.4 %
Average interest-bearing deposits 3,486,738 3,320,908 3,156,604 3,167,944 3,214,942 5.0 % 8.5 %
Borrowings 197,554 123,370 140,245 130,556 137,500 60.1 % 43.7 %
Subordinated debentures 129,335 129,176 129,029 213,171 214,899 0.1 % -39.8 %
Average interest-bearing liabilities $ 3,813,627 $ 3,573,454 $ 3,425,878 $ 3,511,671 $ 3,567,341 6.7 % 6.9 %
Average Noninterest Bearing Deposits
Demand deposits - noninterest bearing $ 2,593,948 $ 2,717,810 $ 2,716,297 $ 2,634,398 $ 2,561,297 -4.6 % 1.3 %
(1) Includes loans held for sale.
(2) Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.
For the Three Months Ended Yield/Rate Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
Average Yields and Rates 2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Loans receivable(1) 5.21 % 4.67 % 4.31 % 4.18 % 4.23 % 0.54 0.98
Securities(2) 1.47 % 1.40 % 1.27 % 1.11 % 0.83 % 0.08 0.64
FHLB stock 7.00 % 5.93 % 5.93 % 6.14 % 6.00 % 1.07 1.00
Interest-bearing deposits in other banks 3.42 % 2.09 % 0.57 % 0.18 % 0.15 % 1.33 3.27
Interest-earning assets 4.67 % 4.15 % 3.80 % 3.46 % 3.27 % 0.52 1.40
Interest-bearing deposits 1.70 % 0.78 % 0.31 % 0.26 % 0.28 % 0.91 1.42
Borrowings 2.55 % 1.24 % 1.10 % 1.05 % 1.05 % 1.30 1.50
Subordinated debentures 4.67 % 4.37 % 4.14 % 6.75 % 4.68 % 0.30 -0.01
Interest-bearing liabilities 1.84 % 0.93 % 0.49 % 0.69 % 0.57 % 0.91 1.27
Net interest margin (taxable equivalent basis) 3.67 % 3.66 % 3.55 % 3.10 % 2.96 % 0.01 0.71
Cost of deposits 0.97 % 0.43 % 0.17 % 0.14 % 0.15 % 0.54 0.82
(1) Includes loans held for sale.
(2) Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.

Credit loss expense for the fourth quarter was $0.1 million and included a $0.2 million provision for loan losses and a $0.1 million recovery for off-balance sheet items. The fourth quarter also included a recovery of an SBA guarantee repair loss allowance of less than $0.1 million. For the third quarter, credit loss expense was $0.6 million and included a $0.4 million negative provision for loan losses and a $1.0 million provision for off-balance sheet items.

Credit loss expense was $0.8 million for the full year 2022 compared to a credit loss recovery of $24.4 million for 2021. The full year 2022 credit loss expense included a $0.3 million provision for loan losses and a $0.5 million provision for off-balance sheet items. The credit loss expense recovery for 2021 was comprised of a $24.1 million recovery for credit losses, a $0.2 million recovery for off-balance sheet items and $1.7 million recovery for accrued interest receivable for loans currently or previously modified under the CARES Act, offset by $1.6 from an SBA guarantee repair loss allowance.

Noninterest income for the fourth quarter declined $1.4 million to $7.5 million from $8.9 million for the third quarter of 2022. The decline reflected a $0.6 million decrease in all other operating income, a $0.3 million decrease in gains on the sale of SBA 7(a) loans, a $0.2 million decrease in service charges on deposits, and a $0.3 million valuation adjustment to bank-owned life insurance. All other operating income declined primarily due to a $0.5 million decrease from the third quarter gain realized on the disposition of a lease residual. The volume of SBA loans sold in the fourth quarter declined to $40.9 million from $43.7 million for the third quarter and trade premiums also declined to 5.99% for the fourth quarter from 6.67% for the third quarter.

Noninterest income was $34.2 million for the full year 2022 compared with $40.5 million for 2021, down 15.5% primarily due to the $7.8 million decline in the gain on sale of SBA loans. The volume of SBA loans sold for the full year 2022 declined to $156.1 million from $261.8 million for the full year 2021. Full year 2021 SBA loan sales included $132.7 million of second-draw PPP loans sold for gains of $3.0 million.

For the Three Months Ended (in thousands) Percentage Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
Noninterest Income 2022
2022 2022 2022 2021
vs. Q3-22 vs. Q4-21
Service charges on deposit accounts $ 2,742 $ 2,996 $ 2,875 $ 2,875 $ 3,007 -8.5 % -8.8 %
Trade finance and other service charges and fees 1,115 1,132 1,416 1,142 1,160 -1.5 % -3.9 %
Servicing income 725 635 663 734 666 14.2 % 8.9 %
Bank-owned life insurance income (expense) (97 ) 245 246 244 252 -139.6 % -138.5 %
All other operating income 1,039 1,656 1,336 1,004 1,017 -37.3 % 2.2 %
Service charges, fees & other 5,524 6,664 6,536 5,999 6,102 -17.1 % -9.5 %
Gain on sale of SBA loans 1,933 2,250 2,774 2,521 3,791 -14.1 % -49.0 %
Net gain (loss) on sales of securities - - - - (598 ) 0.0 % -100.0 %
Gain (loss) on sale of bank premises - - - - - 0.0 % 0.0 %
Total noninterest income $ 7,457 $ 8,914 $ 9,310 $ 8,520 $ 9,295 -16.3 % -19.8 %

Noninterest expense for the fourth quarter increased $0.5 million to $33.8 million from $33.3 million for the third quarter of 2022. The increase reflected a $0.9 million increase in salaries and benefits mostly due to adjustments to incentive compensation, which was offset by a $1.1 million decrease in occupancy and equipment largely due to adjustments to real property taxes on leased and owned premises. In addition, other operating expenses included a $0.4 million servicing asset valuation adjustment while changes in activity levels contributed to the $0.5 million increase in professional fees and a $0.2 million decrease in advertising and promotion. The efficiency ratio for the fourth quarter of 2022 increased slightly to 46.99%, from 46.22% for the prior quarter.

Noninterest expense was $130.3 million for the full year 2022 compared with $124.5 million for 2021, up 4.7%. The increase reflected a $3.6 million, or 4.9% increase in salaries and benefits, a $1.8 million increase in other operating expenses, a $1.1 million increase in data processing expenses and a $1.0 million increase in advertising and promotion offset by a $1.4 million decrease in occupancy and equipment. The efficiency ratio for the full year 2022 was 47.93%, compared with 52.84% for 2021 (54.01% excluding securities gains and deferred origination costs on second-draw PPP loans).

For the Three Months Ended (in thousands) Percentage Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
2022
2022
2022 2022
2021
vs. Q3-22 vs. Q4-21
Noninterest Expense
Salaries and employee benefits $ 20,279 $ 19,365 $ 18,779 $ 17,717 $ 18,644 4.7 % 8.8 %
Occupancy and equipment 3,668 4,736 4,597 4,646 4,840 -22.6 % -24.2 %
Data processing 3,431 3,352 3,114 3,236 3,228 2.4 % 6.3 %
Professional fees 1,783 1,249 1,231 1,430 1,443 42.8 % 23.6 %
Supplies and communication 683 710 581 665 795 -3.8 % -14.1 %
Advertising and promotion 974 1,186 660 817 964 -17.9 % 1.0 %
All other operating expenses 3,041 2,698 2,463 3,186 1,980 12.7 % 53.6 %
Subtotal 33,859 33,296 31,425 31,697 31,894 1.7 % 6.2 %
Other real estate owned expense (income) (70 ) 2 50 12 - -3600.0 % 0.0 %
Repossessed personal property expense (income) 55 (23 ) - (17 ) (258 ) 141.8 % -121.3 %
Total noninterest expense $ 33,844 $ 33,275 $ 31,475 $ 31,692 $ 31,636 1.7 % 7.0 %

Hanmi recorded a provision for income taxes of $9.6 million for the fourth quarter of 2022, compared to $11.0 million in the third quarter of 2022 and representing an effective tax rate of 25.3%, compared to 28.8% for the third quarter. The effective tax rate for the full year 2022 was 27.9%, compared to 27.2% for the full year 2021.

Financial Position
Total assets at December 31, 2022 increased 3.5%, or $248.6 million, to $7.38 billion from $7.13 billion at September 30, 2022. The sequential quarter increase reflected a 2.9%, or $166.1 million, growth in loans receivable as well as a $77.3 million increase in cash and due from banks supported by a $250.0 million increase in borrowings. From December 31, 2021, total assets increased 7.6%, or $518.5 million. The year increase reflected a 16.1%, or $816.6 million, growth in loans receivable supported by a 42.1%, or $256.5 million decrease in cash and due from banks, a 6.6%, or $381.8 million increase in deposits and a 36.0%, or $126.9 million, net increase in borrowings and subordinated debentures.

Loans receivable, before the allowance for credit losses, were $5.97 billion at December 31, 2022, up from $5.80 billion at September 30, 2022. Loans held for sale, representing the guaranteed portion of SBA 7(a) loans, were $8.0 million at the end of the fourth quarter of 2022, compared with $10.0 million at the end of the third quarter.

As of (in thousands) Percentage Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Loan Portfolio
Commercial real estate loans $ 3,833,397 $ 3,853,947 $ 3,829,656 $ 3,771,453 $ 3,701,864 -0.5 % 3.6 %
Residential/consumer loans 734,473 649,591 521,576 432,805 400,548 13.1 % 83.4 %
Commercial and industrial loans 804,475 732,030 766,813 633,107 561,830 9.9 % 43.2 %
Leases 594,788 565,423 537,358 500,135 487,299 5.2 % 22.1 %
Loans receivable 5,967,133 5,800,991 5,655,403 5,337,500 5,151,541 2.9 % 15.8 %
Loans held for sale 8,043 10,044 18,528 15,617 13,342 -19.9 % -39.7 %
Total $ 5,975,176 $ 5,811,035 $ 5,673,931 $ 5,353,117 $ 5,164,883 2.8 % 15.7 %
As of
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2022
2022
2022
2022
2021
Composition of Loan Portfolio
Commercial real estate loans 64.2 % 66.3 % 67.5 % 70.5 % 71.6 %
Residential/consumer loans 12.3 % 11.2 % 9.2 % 8.1 % 7.8 %
Commercial and industrial loans 13.5 % 12.6 % 13.5 % 11.8 % 10.9 %
Leases 9.9 % 9.7 % 9.5 % 9.3 % 9.4 %
Loans receivable 99.9 % 99.8 % 99.7 % 99.7 % 99.7 %
Loans held for sale 0.1 % 0.2 % 0.3 % 0.3 % 0.3 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

New loan production was $473.8 million for the fourth quarter of 2022 at an average rate of 6.85% while $121.4 million of loans paid-off during the quarter at an average rate of 6.27%.

Commercial real estate loan production for the fourth quarter of 2022 was $86.5 million. Commercial and industrial loan production was $137.9 million, SBA loan production was $53.2 million, equipment finance production was $89.9 million and residential mortgage loan production was $107.0 million.

New loan production for the full year 2022 was a record $2.12 billion, an increase of 9.1%, or $176.6 million, from $1.94 billion for the full year 2021 and 17.1% when excluding 2021 second-draw PPP loans.

For the Three Months Ended (in thousands)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2022
2022
2022
2022
2021
New Loan Production
Commercial real estate loans $ 86,500 $ 132,870 $ 271,006 $ 233,295 $ 291,543
Commercial and industrial loans 137,902 88,015 96,187 98,432 116,365
SBA loans 53,209 44,898 67,900 42,632 47,397
Leases receivable 89,193 86,092 95,371 71,487 83,813
Residential/consumer loans 106,955 140,432 111,766 61,023 85,966
subtotal 473,759 492,307 642,230 506,869 625,084
Payoffs (121,409 ) (139,883 ) (230,536 ) (181,026 ) (152,134 )
Amortization (91,333 ) (80,294 ) (94,543 ) (96,852 ) (90,358 )
Loan sales (50,550 ) (45,418 ) (41,937 ) (29,577 ) (41,274 )
Net line utilization (43,124 ) (78,927 ) 43,295 (12,620 ) (48,203 )
Charge-offs & OREO (1,201 ) (2,197 ) (606 ) (835 ) (439 )
Loans receivable-beginning balance 5,800,991 5,655,403 5,337,500 5,151,541 4,858,865
Loans receivable-ending balance $ 5,967,133 $ 5,800,991 $ 5,655,403 $ 5,337,500 $ 5,151,541

Deposits were $6.17 billion at the end of the fourth quarter of 2022, down $33.3 million, or 0.5%, from $6.20 billion at the end of the preceding quarter. The change was primarily driven by a $708.5 million increase in time deposits partially offset by a $500.1 million decline in money market and savings deposits and a $231.9 million decrease in noninterest-bearing demand deposits. Noninterest-bearing demand deposits represented 41.2% of total deposits at December 31, 2022 and the loan-to-deposit ratio was 96.7%.

As of (in thousands) Percentage Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Deposit Portfolio
Demand: noninterest-bearing $ 2,539,602 $ 2,771,498 $ 2,782,737 $ 2,678,726 $ 2,574,517 -8.4 % -1.4 %
Demand: interest-bearing 115,573 125,408 123,614 126,907 125,183 -7.8 % -7.7 %
Money market and savings 1,556,690 2,056,793 2,102,161 2,080,969 2,099,381 -24.3 % -25.9 %
Time deposits 1,956,207 1,247,677 970,878 896,568 987,188 56.8 % 98.2 %
Total deposits $ 6,168,072 $ 6,201,376 $ 5,979,390 $ 5,783,170 $ 5,786,269 -0.5 % 6.6 %
As of
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2022
2022
2022
2022
2021
Composition of Deposit Portfolio
Demand: noninterest-bearing 41.2 % 44.7 % 46.5 % 46.3 % 44.4 %
Demand: interest-bearing 1.9 % 2.0 % 2.1 % 2.2 % 2.2 %
Money market and savings 25.2 % 33.2 % 35.2 % 36.0 % 36.3 %
Time deposits 31.7 % 20.1 % 16.2 % 15.5 % 17.1 %
Total deposits 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Stockholders’ equity at December 31, 2022 was $637.5 million, compared with $608.9 million at September 30, 2022. The sequential quarter increase was primarily due to $20.9 million of fourth quarter net income net of dividends as well as a $7.1 million reduction in unrealized after-tax loss due to changes in the value of the securities portfolio resulting from decreases in intermediate-term interest rates during the fourth quarter. Tangible common stockholders’ equity was $626.3 million, or 8.50% of tangible assets, at December 31, 2022, compared with $597.6 million, or 8.40% of tangible assets at the end of the third quarter. Tangible book value per share increased to $20.54 at December 31, 2022 from $19.60 at the end of the prior quarter.

Hanmi and the Bank exceeded the minimum regulatory capital requirements and the Bank continues to exceed the minimum for the “well capitalized” category. At December 31, 2022, Hanmi’s preliminary Common equity Tier 1 capital ratio was 11.37% and its Total risk-based capital ratio was 14.49%, compared with 11.21% and 14.38%, respectively, at the end of the third quarter of 2022.

As of Ratio Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Regulatory Capital ratios(1)
Hanmi Financial
Total risk-based capital 14.49 % 14.38 % 14.31 % 14.73 % 16.57 % 0.11 -2.08
Tier 1 risk-based capital 11.71 % 11.55 % 11.42 % 11.71 % 11.93 % 0.16 -0.22
Common equity tier 1 capital 11.37 % 11.21 % 11.07 % 11.34 % 11.55 % 0.16 -0.18
Tier 1 leverage capital ratio 10.07 % 9.99 % 9.94 % 9.70 % 9.63 % 0.08 0.44
Hanmi Bank
Total risk-based capital 13.86 % 13.76 % 13.70 % 14.19 % 14.70 % 0.10 -0.84
Tier 1 risk-based capital 12.85 % 12.73 % 12.64 % 13.09 % 13.59 % 0.12 -0.74
Common equity tier 1 capital 12.85 % 12.73 % 12.64 % 13.09 % 13.59 % 0.12 -0.74
Tier 1 leverage capital ratio 11.07 % 11.02 % 11.00 % 10.84 % 10.96 % 0.05 0.11
(1)Preliminary ratios for December 31, 2022

Asset Quality
Loans 30 to 89 days past due and still accruing were 0.13% of loans at the end of the fourth quarter of 2022, compared with 0.09% at the end of the prior quarter.

Special mention loans were $79.0 million at the end of the fourth quarter, down from $123.0 million at September 30, 2022. Reductions in special mention loans included upgrades to pass loans of $34.1 million and payoffs of $14.6 million. The quarter-over-quarter change also included increases from downgrades of pass loans of $0.4 million and upgrades from classified loans of $3.0 million.

Classified loans were $46.2 million at December 31, 2022, down from $47.7 million at the end of the third quarter.

Nonperforming loans were $9.8 million at December 31, 2022, down from $11.6 million at the end of the third quarter. As a percentage of the loan portfolio, nonperforming loans improved to 0.17% at quarter-end, down from 0.20% at the end of the third quarter.

Nonperforming assets were $10.0 million at the end of the fourth quarter of 2022, down from $12.4 million at the end of the prior quarter. As a percentage of total assets, nonperforming assets also improved to 0.14% at quarter-end, down from 0.17% at the end of the third quarter.

Gross charge-offs for the fourth quarter of 2022 were $1.2 million, compared with $2.1 million for the preceding quarter. Recoveries of previously charged-off loans for the fourth quarter of 2022 were $0.9 million, compared with $1.0 million for the prior quarter. As a result, there were net charge-offs of $0.3 million for the fourth quarter of 2022, compared with net charge-offs of $1.1 million for the prior quarter. For the fourth quarter of 2022, net charge-offs represented 0.02% of average loans on an annualized basis, compared with net charge-offs of 0.08% of average loans for the third quarter on an annualized basis.

The allowance for credit losses was $71.5 million at December 31, 2022, relatively unchanged from $71.6 million at September 30, 2022. The ratio of the allowance for credit losses to loans declined slightly to 1.20% at the end of the fourth quarter of 2022 from 1.23% at the end of the third quarter. Specific allowances for loans increased $1.0 million while the allowance for quantitative and qualitative considerations decreased $1.1 million.

As of or for the Three Months Ended (in thousands) Amount Change
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Q4-22 Q4-22
2022
2022
2022
2022
2021
vs. Q3-22 vs. Q4-21
Asset Quality Data and Ratios
Delinquent loans:
Loans, 30 to 89 days past due and still accruing $ 7,492 $ 4,936 $ 4,174 $ 5,493 $ 5,881 $ 2,556 $ 1,611
Delinquent loans to total loans 0.13% 0.09% 0.07% 0.10% 0.11% 0.04 0.01
Criticized loans:
Special mention $ 79,013 $ 122,952 $ 80,453 $ 140,958 $ 95,295 $ (43,939 ) $ (16,282 )
Classified 46,192 47,740 53,007 57,402 60,632 (1,548 ) (14,440 )
Total criticized loans $ 125,205 $ 170,692 $ 133,460 $ 198,360 $ 155,927 $ (45,487 ) $ (30,722 )
Nonperforming assets:
Nonaccrual loans $ 9,846 $ 11,592 $ 11,044 $ 11,470 $ 13,360 $ (1,746 ) $ (3,514 )
Loans 90 days or more past due and still accruing - - - - - - -
Nonperforming loans 9,846 11,592 11,044 11,470 13,360 (1,746 ) (3,514 )
Other real estate owned, net 117 792 675 675 675 (675 ) (558 )
Nonperforming assets $ 9,963 $ 12,384 $ 11,719 $ 12,145 $ 14,035 $ (2,421 ) $ (4,072 )
Nonperforming loans to total loans 0.17% 0.20% 0.20% 0.21% 0.26%
Nonperforming assets to assets 0.14% 0.17% 0.17% 0.18% 0.20%
Allowance for credit losses:
Balance at beginning of period $ 71,584 $ 73,067 $ 71,512 $ 72,557 $ 76,613
Credit loss expense (recovery) on loans 221 (374 ) 1,640 (1,147 ) (13,375 )
Net loan (charge-offs) recoveries (282 ) (1,109 ) (85 ) 102 9,319
Balance at end of period $ 71,523 $ 71,584 $ 73,067 $ 71,512 $ 72,557
Net loan charge-offs (recoveries) to average loans(1) 0.02% 0.08% 0.01% -0.01% -0.76%
Allowance for credit losses to loans 1.20% 1.23% 1.29% 1.34% 1.41%
Allowance for credit losses related to off-balance sheet items:
Balance at beginning of period $ 3,250 $ 2,313 $ 2,358 $ 2,586 $ 4,851
Credit loss expense (recovery) on off-balance sheet items (135 ) 937 (45 ) (228 ) (2,265 )
Balance at end of period $ 3,115 $ 3,250 $ 2,313 $ 2,358 $ 2,586
Unused commitments to extend credit $ 780,543 $ 746,354 $ 613,804 $ 626,615 $ 626,474
Allowance for Losses on Accrued Interest Receivable:
Balance at beginning of period - - - - $ 311
Interest reversal for loans placed on nonaccrual - - - - -
Credit loss expense (recovery) on interest accrued on CARES Act modifications - - - - (311 )
Balance at end of period - - - - $ -
(1)Annualized

Corporate Developments
On October 27, 2022, Hanmi’s Board of Directors declared a cash dividend on its common stock for the 2022 fourth quarter of $0.25 per share. The dividend was paid on November 23, 2022, to stockholders of record as of the close of business on November 7, 2022.

Earnings Conference Call
Hanmi Bank will host its fourth quarter and year-end 2022 earnings conference call today, January 24, 2023 at 2:00 p.m. PST (5:00 p.m. EST) to discuss these results. This call will also be webcast. To access the event the call, please dial 1-877-407-9039 before 2:00 p.m. PST, using access code Hanmi Bank. To listen to the call online, either live or archived, please visit Hanmi’s Investor Relations website at www.hanmi.com.

About Hanmi Financial Corporation
Headquartered in Los Angeles, California, Hanmi Financial Corporation owns Hanmi Bank, which serves multi-ethnic communities through its network of 35 full-service branches and eight loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington and Georgia. Hanmi Bank specializes in real estate, commercial, SBA and trade finance lending to small and middle market businesses. Additional information is available at www.hanmi.com.

Forward-Looking Statements
This press release contains forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about our anticipated future operating and financial performance, financial position and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital and strategic plans, and other similar forecasts and statements of expectation and statements of assumption underlying any of the foregoing. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that our forward-looking statements to be reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statements. These factors include the following:

  • a failure to maintain adequate levels of capital and liquidity to support our operations;
  • the effect of potential future supervisory action against us or Hanmi Bank;
  • the effect of our rating under the Community Reinvestment Act and our ability to address any issues raised in our regulatory exams;
  • general economic and business conditions internationally, nationally and in those areas in which we operate, including any potential recessionary conditions;
  • volatility and deterioration in the credit and equity markets;
  • changes in consumer spending, borrowing and savings habits;
  • availability of capital from private and government sources;
  • demographic changes;
  • competition for loans and deposits and failure to attract or retain loans and deposits;
  • inflation and fluctuations in interest rates and a decline in the level of our interest rate spread;
  • the current or anticipated impact of military conflict, terrorism or other geopolitical events;
  • risks of natural disasters;
  • legal proceedings and litigation brought against us;
  • a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;
  • the failure to maintain current technologies;
  • risks associated with Small Business Administration loans;
  • failure to attract or retain key employees;
  • our ability to access cost-effective funding;
  • fluctuations in real estate values;
  • changes in accounting policies and practices;
  • changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
  • the continuing impact of the COVID-19 pandemic on our business and results of operation;
  • the ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests;
  • strategic transactions we may enter into;
  • the adequacy of our allowance for credit losses;
  • our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses;
  • changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements;
  • our ability to control expenses; and
  • cyber security and fraud risks against our information technology and those of our third-party providers and vendors.

In addition, we set forth certain risks in our reports filed with the U.S. Securities and Exchange Commission, including, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K that we will file hereafter, which could cause actual results to differ from those projected. We undertake no obligation to update such forward-looking statements except as required by law.

Investor Contacts:
Romolo (Ron) Santarosa
Senior Executive Vice President & Chief Financial Officer
213-427-5636

Larry Clark, CFA
Investor Relations
Financial Profiles, Inc.
lclark@finprofiles.com
310-622-8223


Hanmi Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
December 31, September 30, Percentage December 31, Percentage
2022 2022 Change Change 2021 Change Change
Assets
Cash and due from banks $ 352,421 $ 275,159 77,262 28.1 % $ 608,965 (256,544 ) -42.1 %
Securities available for sale, at fair value 853,838 830,151 23,687 2.9 % 910,790 (56,952 ) -6.3 %
Loans held for sale, at the lower of cost or fair value 8,043 10,044 (2,001 ) -19.9 % 13,342 (5,299 ) -39.7 %
Loans receivable, net of allowance for credit losses 5,895,610 5,729,407 166,203 2.9 % 5,078,984 816,626 16.1 %
Accrued interest receivable 18,537 15,356 3,181 20.7 % 11,976 6,561 54.8 %
Premises and equipment, net 22,850 23,591 (741 ) -3.1 % 24,788 (1,938 ) -7.8 %
Customers' liability on acceptances 328 200 128 64.0 % - 328 -
Servicing assets 7,176 7,424 (248 ) -3.3 % 7,080 96 1.4 %
Goodwill and other intangible assets, net 11,225 11,267 (42 ) -0.4 % 11,395 (170 ) -1.5 %
Federal Home Loan Bank ("FHLB") stock, at cost 16,385 16,385 - 0.0 % 16,385 - 0.0 %
Bank-owned life insurance 55,544 55,641 (97 ) -0.2 % 54,905 639 1.2 %
Prepaid expenses and other assets 136,305 153,886 (17,581 ) -11.4 % 119,977 16,328 13.6 %
Total assets $ 7,378,262 $ 7,128,511 $ 249,751 3.5 % $ 6,858,587 $ 519,675 7.6 %
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 2,539,602 $ 2,771,498 (231,896 ) -8.4 % $ 2,574,517 (34,915 ) -1.4 %
Interest-bearing 3,628,470 3,429,878 198,592 5.8 % 3,211,752 416,718 13.0 %
Total deposits 6,168,072 6,201,376 (33,304 ) -0.5 % 5,786,269 381,803 6.6 %
Accrued interest payable 7,792 2,180 5,612 257.4 % 1,161 6,631 571.1 %
Bank's liability on acceptances 328 200 128 64.0 % - 328 -
Borrowings 350,000 100,000 250,000 250.0 % 137,500 212,500 154.5 %
Subordinated debentures 129,409 129,261 148 0.1 % 215,006 (85,597 ) -39.8 %
Accrued expenses and other liabilities 85,146 86,601 (1,455 ) -1.7 % 75,234 9,912 13.2 %
Total liabilities 6,740,747 6,519,618 221,129 3.4 % 6,215,170 525,577 8.5 %
Stockholders' equity:
Common stock 33 33 - 0.0 % 33 - 0.0 %
Additional paid-in capital 583,410 582,695 715 0.1 % 580,796 2,614 0.5 %
Accumulated other comprehensive income (88,985 ) (96,062 ) 7,077 7.4 % (8,443 ) (80,542 ) -954.0 %
Retained earnings 269,542 248,684 20,858 8.4 % 196,784 72,758 37.0 %
Less treasury stock (126,485 ) (126,457 ) (28 ) 0.0 % (125,753 ) (732 ) -0.6 %
Total stockholders' equity 637,515 608,893 28,622 4.7 % 643,417 (5,902 ) -0.9 %
Total liabilities and stockholders' equity $ 7,378,262 $ 7,128,511 249,751 3.5 % $ 6,858,587 519,675 7.6 %


Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except share and per share data)
Three Months Ended
December 31, September 30, Percentage December 31, Percentage
2022 2022 Change 2021 Change
Interest and dividend income:
Interest and fees on loans receivable $ 77,123 $ 66,976 15.2 % $ 52,240 47.6 %
Interest on securities 3,633 3,271 11.1 % 1,821 99.5 %
Dividends on FHLB stock 289 245 18.0 % 248 16.5 %
Interest on deposits in other banks 1,194 958 24.6 % 302 295.4 %
Total interest and dividend income 82,239 71,450 15.1 % 54,611 50.6 %
Interest expense:
Interest on deposits 14,900 6,567 126.9 % 2,236 566.4 %
Interest on borrowings 1,192 349 241.5 % 364 227.5 %
Interest on subordinated debentures 1,586 1,448 9.5 % 2,515 -36.9 %
Total interest expense 17,678 8,364 111.4 % 5,115 245.6 %
Net interest income before credit loss expense 64,561 63,086 2.3 % 49,496 30.4 %
Credit loss expense (recovery) 52 563 -90.8 % (15,951 ) 30775.0 %
Net interest income after credit loss expense 64,509 62,523 3.2 % 65,447 -1.4 %
Noninterest income:
Service charges on deposit accounts 2,742 2,996 -8.5 % 3,007 -8.8 %
Trade finance and other service charges and fees 1,115 1,132 -1.5 % 1,160 -3.9 %
Gain on sale of Small Business Administration ("SBA") loans 1,933 2,250 -14.1 % 3,791 -49.0 %
Other operating income 1,667 2,536 -34.3 % 1,337 24.7 %
Total noninterest income 7,457 8,914 9,295 -19.8 %
Noninterest expense:
Salaries and employee benefits 20,279 19,365 4.7 % 18,644 8.8 %
Occupancy and equipment 3,668 4,736 -22.6 % 4,840 -24.2 %
Data processing 3,431 3,352 2.4 % 3,228 6.3 %
Professional fees 1,783 1,249 42.8 % 1,443 23.6 %
Supplies and communications 683 710 -3.8 % 795 -14.1 %
Advertising and promotion 974 1,186 -17.9 % 964 1.1 %
Other operating expenses 3,026 2,677 13.0 % 1,722 75.7 %
Total noninterest expense 33,844 33,275 1.7 % 31,636 7.0 %
Income before tax 38,122 38,162 -0.1 % 43,106 -11.6 %
Income tax expense 9,643 10,993 -12.3 % 9,775 -1.4 %
Net income $ 28,479 $ 27,169 4.8 % $ 33,331 -14.6 %
Basic earnings per share: $ 0.93 $ 0.89 $ 1.10
Diluted earnings per share: $ 0.93 $ 0.89 $ 1.09
Weighted-average shares outstanding:
Basic 30,346,343 30,314,439 30,243,560
Diluted 30,442,175 30,396,762 30,328,163
Common shares outstanding 30,485,621 30,484,004 30,407,261


Hanmi Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except share and per share data)
Twelve Months Ended
December 31, December 31, Percentage
2022 2021 Change
Interest and dividend income:
Interest and fees on loans receivable $ 257,878 $ 208,602 23.6 %
Interest on securities 12,351 6,230 98.3 %
Dividends on FHLB stock 1,024 941 8.8 %
Interest on deposits in other banks 2,560 902 183.8 %
Total interest and dividend income 273,813 216,675 26.4 %
Interest expense:
Interest on deposits 25,938 11,655 122.5 %
Interest on borrowings 2,249 1,697 32.5 %
Interest on subordinated debentures 7,979 8,273 -3.6 %
Total interest expense 36,166 21,625 67.2 %
Net interest income before credit loss expense 237,647 195,050 21.8 %
Credit loss expense (recovery) 836 (24,403 ) 103.4 %
Net interest income after credit loss expense 236,811 219,453 7.9 %
Noninterest income:
Service charges on deposit accounts 11,488 11,043 4.0 %
Trade finance and other service charges and fees 4,805 4,628 3.8 %
Gain on sale of Small Business Administration ("SBA") loans 9,478 17,266 -45.1 %
Other operating income 8,429 7,559 11.5 %
Total noninterest income 34,200 40,496 -15.5 %
Noninterest expense:
Salaries and employee benefits 76,140 72,561 4.9 %
Occupancy and equipment 17,648 19,075 -7.5 %
Data processing 13,134 12,003 9.4 %
Professional fees 5,692 5,566 2.3 %
Supplies and communications 2,638 3,026 -12.8 %
Advertising and promotion 3,637 2,649 37.3 %
Other operating expenses 11,395 9,575 19.0 %
Total noninterest expense 130,284 124,455 4.7 %
Income before tax 140,727 135,494 3.9 %
Income tax expense 39,333 36,817 6.8 %
Net income $ 101,394 $ 98,677 2.8 %
Basic earnings per share: $ 3.33 $ 3.22
Diluted earnings per share: $ 3.32 $ 3.22
Weighted-average shares outstanding:
Basic 30,299,148 30,393,559
Diluted 30,392,057 30,471,747
Common shares outstanding 30,485,621 30,407,261

Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(Dollars in thousands)
Three Months Ended
December 31, 2022 September 30, 2022 December 31, 2021
Interest Average Interest Average Interest Average
Average Income / Yield / Average Income / Yield / Average Income / Yield /
Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
Interest-earning assets:
Loans receivable(1) $ 5,877,298 $ 77,123 5.21 % $ 5,696,587 $ 66,976 4.67 % $ 4,896,952 $ 52,240 4.23 %
Securities(2) 966,299 3,633 1.47 % 956,989 3,272 1.40 % 914,148 1,821 0.83 %
FHLB stock 16,385 289 7.00 % 16,385 245 5.93 % 16,385 248 6.00 %
Interest-bearing deposits in other banks 138,476 1,194 3.42 % 181,401 957 2.09 % 802,901 302 0.15 %
Total interest-earning assets 6,998,458 82,239 4.67 % 6,851,362 71,450 4.15 % 6,630,386 54,611 3.27 %
Noninterest-earning assets:
Cash and due from banks 70,203 66,865 66,788
Allowance for credit losses (71,976 ) (73,338 ) (78,102 )
Other assets 255,493 250,500 224,691
Total assets $ 7,252,178 $ 7,095,389 $ 6,843,763
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Demand: interest-bearing $ 119,106 $ 32 0.11 % $ 121,269 $ 32 0.10 % $ 122,602 $ 17 0.06 %
Money market and savings 1,781,834 6,187 1.38 % 2,079,490 3,807 0.73 % 2,078,659 1,215 0.23 %
Time deposits 1,585,798 8,681 2.17 % 1,120,149 2,728 0.97 % 1,013,681 1,004 0.39 %
Total interest-bearing deposits 3,486,738 14,900 1.70 % 3,320,908 6,567 0.78 % 3,214,942 2,236 0.28 %
Borrowings 197,554 1,269 2.55 % 123,370 387 1.24 % 137,500 364 1.05 %
Subordinated debentures 129,335 1,509 4.67 % 129,176 1,410 4.37 % 214,899 2,515 4.68 %
Total interest-bearing liabilities 3,813,627 17,678 1.84 % 3,573,454 8,364 0.93 % 3,567,341 5,115 0.57 %
Noninterest-bearing liabilities and equity:
Demand deposits: noninterest-bearing 2,593,948 2,717,810 2,561,297
Other liabilities 134,074 112,336 82,077
Stockholders' equity 710,529 691,789 633,048
Total liabilities and stockholders' equity $ 7,252,178 $ 7,095,389 $ 6,843,763
Net interest income (tax equivalent basis) $ 64,561 $ 63,086 $ 49,496
Cost of deposits 0.97 % 0.43 % 0.15 %
Net interest spread (taxable equivalent basis) 2.83 % 3.22 % 2.70 %
Net interest margin (taxable equivalent basis) 3.67 % 3.66 % 2.96 %
(1) Includes average loans held for sale
(2) Income calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.


Hanmi Financial Corporation and Subsidiaries
Average Balance, Average Yield Earned, and Average Rate Paid (Unaudited)
(Dollars in thousands)
Twelve Months Ended
December 31, 2022 December 31, 2021
Interest Average Interest Average
Average Income / Yield / Average Income / Yield /
Balance Expense Rate Balance Expense Rate
Assets
Interest-earning assets:
Loans receivable(1) $ 5,596,564 $ 257,878 4.61 % $ 4,794,505 $ 208,601 4.35 %
Securities(2) 949,889 12,351 1.27 % 845,437 6,230 0.75 %
FHLB stock 16,385 1,024 6.25 % 16,385 941 5.74 %
Interest-bearing deposits in other banks 236,678 2,560 1.08 % 684,442 903 0.13 %
Total interest-earning assets 6,799,516 273,813 4.03 % 6,340,769 216,675 3.42 %
Noninterest-earning assets:
Cash and due from banks 66,993 62,401
Allowance for credit losses (73,094 ) (84,735 )
Other assets 247,838 225,750
Total assets $ 7,041,253 $ 6,544,185
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Demand: interest-bearing $ 121,992 $ 100 0.08 % $ 113,326 $ 61 0.05 %
Money market and savings 2,025,961 12,753 0.63 % 2,028,235 5,199 0.26 %
Time deposits 1,136,073 13,085 1.15 % 1,111,857 6,395 0.58 %
Total interest-bearing deposits 3,284,026 25,938 0.79 % 3,253,418 11,655 0.36 %
Borrowings 148,047 2,382 1.61 % 145,297 1,697 1.17 %
Subordinated debentures 149,891 7,846 5.23 % 154,400 8,273 5.35 %
Total interest-bearing liabilities 3,581,964 36,166 1.01 % 3,553,115 21,625 0.61 %
Noninterest-bearing liabilities and equity:
Demand deposits: noninterest-bearing 2,665,646 2,307,052
Other liabilities 109,847 77,637
Stockholders' equity 683,796 606,381
Total liabilities and stockholders' equity $ 7,041,253 $ 6,544,185
Net interest income (tax equivalent basis) $ 237,647 $ 195,050
Cost of deposits 0.44 % 0.21 %
Net interest spread (taxable equivalent basis) 3.02 % 2.81 %
Net interest margin (taxable equivalent basis) 3.50 % 3.08 %
(1) Includes average loans held for sale
(2) Amounts calculated on a fully taxable equivalent basis using the federal tax rate in effect for the periods presented.

Non-GAAP Financial Measures

Tangible Common Equity to Tangible Assets Ratio

Tangible common equity to tangible assets ratio is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is used by management in the analysis of Hanmi’s capital strength. Tangible common equity is calculated by subtracting goodwill and other intangible assets from stockholders’ equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from stockholders’ equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital strength of Hanmi. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:

Tangible Common Equity to Tangible Assets Ratio (Unaudited)
(In thousands, except share, per share data and ratios)
December 31, September 30, June 30, March 31, December 31,
Hanmi Financial Corporation 2022
2022
2022
2022
2021
Assets $ 7,378,262 $ 7,128,511 $ 6,955,968 $ 6,737,052 $ 6,858,587
Less goodwill and other intangible assets (11,225 ) (11,267 ) (11,310 ) (11,353 ) (11,395 )
Tangible assets $ 7,367,037 $ 7,117,244 $ 6,944,658 $ 6,725,699 $ 6,847,192
Stockholders' equity(1) $ 637,515 $ 608,893 $ 618,296 $ 621,452 $ 643,417
Less goodwill and other intangible assets (11,225 ) (11,267 ) (11,310 ) (11,353 ) (11,395 )
Tangible stockholders' equity(1) $ 626,290 $ 597,626 $ 606,986 $ 610,099 $ 632,022
Stockholders' equity to assets 8.64 % 8.54 % 8.89 % 9.22 % 9.38 %
Tangible common equity to tangible assets(1) 8.50 % 8.40 % 8.74 % 9.07 % 9.23 %
Common shares outstanding 30,485,621 30,484,004 30,482,990 30,468,458 30,407,261
Tangible common equity per common share $ 20.54 $ 19.60 $ 19.91 $ 20.02 $ 20.79
(1)There were no preferred shares outstanding at the periods indicated.

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